Economics & Global Affairs

196 Items

Blog Post - Views on the Economy and the World

RMB Reaches 7.0; US Names China a Manipulator

| Aug. 12, 2019

The US-China trade war heated up in the first week of August.  On August 1, Donald Trump abruptly announced plans to impose a 10 % tariff on the remaining $300 billion of imports from China that he had not already hit with earlier tariffs.   The Chinese authorities then allowed their currency, the renminbi (RMB), to fall in value below the highly visible line of 7.0 RMB/$.  The US Administration promptly reacted on August 5 by naming China a “currency manipulator” — the first time any country had been given that designation in 25 years.   Pundits declared a currency war, while investors responded by immediately sending stock markets down.

Blog Post - Views on the Economy and the World

Let’s Forget about 2% Inflation

| July 29, 2019

The Fed has some reasons for cutting interest rates at its meeting July 31, or subsequently if the US economy weakens. (And there are some good arguments on the other side as well, if growth remains as strong as it has been over the last year.)  But I find less persuasive one argument for easing: a perceived imperative to get inflation up to 2.0% or higher.

Federal Reserve Chairman Ben Bernanke set a 2% target for the US inflation rate in January 2012.  Some other countries had already done the same.  Japan followed suit a year later. Indeed Shinzo Abe’s successful accession to prime minister in late 2012 was predicated on the promise that monetary policy would raise inflation (Japan having previously suffered from negative inflation).

Blog Post - Views on the Economy and the World

The Lesson from George H.W. Bush’s Tax Reversal

| Dec. 13, 2018

When President George H.W. Bush was laid to rest earlier this month, the remembrances appropriately remarked on his general decency and competence.  In public commentary, the encomiums tend to be followed by a “but.”  For journalists and historians, it is “but he was only a one-term president.”  He lost the election of 1992, in part because of the recession of 1990-91.  For members of his own political party, the “but” is, “but he broke with the legacy of Ronald Reagan and with his own ‘no new taxes’ pledge.”  They have always blamed his failure to win re-election on that perceived betrayal.

But President Bush’s mistake was making the anti-tax pledge in 1988 in the first place and sticking to it in the first part of his presidency. The 1990 reversal on fiscal policy set the stage for a decade of economic growth that eventually achieved budget surpluses.

Blog Post - Views on the Economy and the World

Gopinath follows Obstfeld at the IMF, in a great tradition

| Dec. 10, 2018

Maury Obstfeld this month completes his exemplary term as Chief Economist at the International Monetary Fund. His departing economic outlook foresees slowing growth in the world economy in 2019 and 2020.

Gita Gopinath, my Harvard colleague, will take up the position in the new year.  (Technically the title is Economic Counsellor and Director of the Research Department.)

Blog Post - Views on the Economy and the World

Trump Renews Charges of Chinese Currency Manipulation

| Sep. 24, 2018

The US Treasury is due in October to submit its biannual report to Congress on what countries, if any, are manipulating their currencies to gain unfair trade advantage.   President Trump has recently resumed the accusation against China  that he made during the election campaign.   “I think China’s manipulating their currency, absolutely. And I think the euro is being manipulated also,” he told Reuters.  He is apparently pressuring the Treasury directly in its deliberations.

Blog Post - Views on the Economy and the World

Year-End Perspectives on the US & Global Economies

| Dec. 20, 2016

A year-end summing up of where we stand is harder than usual this time!I have recently spoken: on “Global Economic Challenges for Donald Trump,” (outline; slides: Ppt, pdf) on a panel at the American Enterprise Institute, Washington, DC, Dec. 5, 2016. Summary & video. And on “An Economy That Works for All Americans” (slides: ppt, pdf)  to the Bipartisan Program for Newly Elected Members of Congress, Institute of Politics, December 7, 2016. And  on “Trade and Inequality,” (slides: Ppt, pdf) at the  Providence Committee on Foreign Relations, Dec.

Blog Post - Views on the Economy and the World

What Will the Trump Presidency Look Like?

| Nov. 12, 2016
We unexpectedly find ourselves in uncharted territory, in so many ways. The United States has never before had a president with no political or military experience. And Donald Trump is especially unpredictable: he has so often said things that conflict with other things he has said. So it is hard to know what he will do.But a possible precedent for what the Trump presidency may look like sits in plain sight: the George W. Bush presidency. To be fair, the Bush family clearly did not support Trump’s campaign.

Blog Post - Views on the Economy and the World

The Gold Standard and Trump

| Oct. 31, 2016
My preceding post, “The Fed and Inequality,” observed that populists have historically favored easy money and low interest rates.  I mentioned William Jennings Bryan’s campaigns for the presidency in the 1890s as well as the supply-siders in the early 1980s who blamed the failure of Reaganomics to produce sufficient growth on Paul Volcker’s efforts to fight inflation with tight monetary policy.An interesting dimension concerns gold.  Bryan’s proposed reform for allowing easy money was to take the US off of the gold standard, most famously in his 1896 “cross of gold” speech.